Ellies Sparks Smart Revolution: R207.6M Bundu Power Deal Redefines Future in South Africa’s Infrastructure Evolution

  • Strategic Shift: Ellies Holdings advances its transformation into a smart infrastructure business through the proposed acquisition of Bundu Power.
  • Financial Snapshot: The R207.6 million deal, funded via debt, sees Bundu Power's R77.7 million net assets and strong profits.
  • Procedural Update: Conditions precedent, a call option provision, and a circular issuance mark the progression of this pivotal acquisition.
By Lethabo Ntsoane

Ellies Holdings Limited is making significant strides in redefining its market presence. The latest development involves the proposed acquisition of Bundu Power, a move that aligns with Ellies’ strategic shift towards becoming a smart infrastructure business.

Background

The journey began on February 1, 2023, when Ellies announced its intent to acquire 100% of the members’ interests in Magetz Electrical Proprietary Limited and Power on Wheels Proprietary Limited, collectively known as Bundu Power. The initial announcement outlined a maximum consideration of R207.6 million.

Amended Agreement

Subsequent to the initial announcement, Ellies, the Vendors, and Bundu Power have now entered into an amended and restated share purchase agreement, providing a more detailed framework for the acquisition.

Assets and Rationale

Bundu Power, a specialist in the distribution and rental of generators and the distribution and installation of solar and ancillary products, aligns with Ellies’ vision of becoming a comprehensive smart infrastructure provider. The acquisition positions Ellies to offer alternative energy solutions across residential, commercial, industrial, hospitality, agricultural, and recreational sectors.

Consideration and Funding

The total consideration for the acquisition is R207.6 million, with Ellies opting to fund the transaction through a debt facility. This strategic financing approach leads Ellies to put the proposed fully underwritten rights offer, initially valued at R120 million, on hold.

Consideration Breakdown:

Payment TypeAmountDate
Interim PaymentsR1 million eachSept 2023 – Jan 2024
Initial PaymentR150 millionUpon fulfillment/waiver
Deferred PaymentsR26.3 million eachWithin 60 days of Feb 2024 & Feb 2025

Financial Information

The financial snapshot of Bundu Power, as of February 28, 2023, reveals net assets valued at R77.7 million, an after-tax profit of R32.4 million for the year ending February 2023, and an estimated profit after tax of R33.94 million for the year ending February 2024.

Conditions Precedent and Additional Terms

The acquisition is contingent on several conditions precedent, including approval from Ellies’ directors and shareholders, successful due diligence, non-competition agreements, and unconditional approval from the Competition Authorities. These conditions must be met by January 31, 2024, unless extended by the parties.

Ellies has also granted the Sellers a call option, allowing them to repurchase members’ interests should Ellies fail to meet payment obligations. However, this call option can be voided if Ellies provides alternative security, satisfying the Sellers.

Categorization and Shareholder Circular

The proposed acquisition falls under the category 1 transaction as per the JSE Listings Requirements, necessitating approval from Ellies shareholders in a general meeting. A comprehensive circular containing details of the acquisition and a notice of the general meeting will be distributed to shareholders by January 31, 2024.

Withdrawal of Cautionary

As of this announcement on December 4, 2023, Ellies withdraws the cautionary issued on September 28, 2022. Shareholders are no longer required to exercise caution when dealing in their Ellies shares.

In reshaping its future, Ellies Holdings is strategically positioning itself in the evolving landscape of smart infrastructure, with Bundu Power as the cornerstone of this transformation. The acquisition not only expands Ellies’ alternative energy solutions but also fortifies its Southern African distribution network, opening new avenues for growth and innovation.

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Lethabo Ntsoane

Lethabo Ntsoane holds a Bachelors Degree in Accounting from the University of South Africa. He is a Financial Product commentator at Rateweb. He is an expect financial product analyst with years of experience in reviewing products and offering commentary. Lethabo majors in financial news, reviews and financial tips. He can be contacted: Email: lethabo@rateweb.co.za Twitter: @NtsoaneLethabo